Diamondback Energy Co. is cutting back oil production after suffering a drop in demand partly caused by the COVID-19 pandemic, the Houston Chronicle reported.
Officials of the oil and natural gas driller on May 4 said they will reduce as much as 15 percent of oil production this month. The company, which operates 14 drilling rigs in the Permian Basin of West Texas, said it plans to shut down half of its rigs by the fourth quarter.
“Diamondback is choosing to curtail production in May because of economics, which should be the baseline for decisions on whether or not to produce barrels,” Chief Executive Travis Stice told the Chronicle in a statement. “Diamondback is prepared to operate in a lower-for-longer oil price environment.”
The reduction in oil production comes as the company registered losses of $272 million during its first quarter ending on March 31. This was down from a profit of $10 million during the same period a year ago.
However, revenue still grew by $35 million, or about 4 percent, to $899 million, up from $864 million a year ago, the report noted.
Oil prices crashed early in March in the wake of a price war between Russia and Saudi Arabia. When states began issuing stay-at-home orders on March 19 to slow the spread of the coronavirus in the U.S., that further slowed demand and oil prices.
“The company said its first-quarter loss was driven by a $1 billion write-down of the value of its businesses after a sharp decline in the price of crude oil,” the Chronicle report stated.
Diamondback had been one of the fastest growing oil companies in Texas.
Company officers responded to the circumstances by stopping well completions for at least a month and by slashing the 2020 capital budget by more than 40%.
The company was averaging 321.1 million barrels of oil per day, up 22 percent from 262.6 million barrels of oil per day a year ago.
It drilled 55 horizontal wells in the Midland Basin and 38 horizontal wells in the Delaware Basin of West Texas and New Mexico.